A Few Great Books on Currency Trading | Motilal Oswal

Forex Trading for Beginners

The word, or rather, the term, forex (foreign exchange) can seem intimidating to most investors. Novices quickly run for the hills when they hear about the basics of currency trading. The fear and apprehensiveness that surrounds the world of currency trading is unfounded in most cases, as it's really not the monster that people make it out to be. Just because currency trading involves the word “currency”, individuals simply jump to the conclusion that investors require a large amount of funds to trade in currency markets. 

Forex trading or foreign exchange trading is a simple process to grasp. It is the method of trading different currencies of various countries. Much like you would trade stocks in the stock market today, you can trade one currency with another in forex markets. Currency trading involves massive amounts of capital in US dollars which are traded on a daily basis. 

Forex Markets - Scary Places? 

The main reason why investors stop to have a serious thought before venturing into these markets is the lack of understanding of where to begin and how to progress from there. It's true that trading in forex requires some acumen in terms of analysis of a technical nature, indicators and chart patterns. The stock market today isn’t that much of a scary place for novices as it has become popular and there are many options to trade with some degree of success. However, currency markets may seem like a challenge to novices, and even to some experienced hands. Therefore, as easy as it may seem to start online forex trading, it's necessary to do your homework beforehand. 

Doing some serious reading is a popular trend to get familiar with currency markets, and you can find a whole library of useful material  from books for newbies to strategy-centric books. What these books do for you is build a robust foundation on which to build effective strategies for trading. Furthermore, they give you great recommendations to aid you in picking forex pairs that could be worth your while in terms of returns. Finally, the main concern on every trader’s mind is related to the element of risk, and this is something due to which traders avoid forex markets in the first place. Experienced writers will guide you in a stepwise way to trade in currencies and mitigate your risk with handy tips. Online forex trading exchanges need not be a scary place after you have had a good read with some of the books mentioned in this article. However, before you have a peek at the books, you may want to get yourself some basic knowledge about forex trading. 

Forex Trading and Forex Markets

A term which exemplifies the activity of foreign currency and exchange, forex is simply the method by which one currency is changed into another currency. This may be done for various reasons, such as tourism, trading, or commerce. According to a triennial report issued by the Bank for International Settlements (an international bank established for national-level central banks), daily volumes of trading in forex markets reached a huge $6.6 trillion for the year 2019. (https://www.bis.org/statistics/rpfx19_fx.htm). Trading in currencies may prove complex and risky to the cleverest investors as there are huge trade flows occurring within the entire system. One thing that is on the positive side of forex trading is that it is a transparent business and gives investors access to dealing interbank-wise. Retail investors can spend time learning about the forex markets before indulging in online forex trading. This is where good books enter the picture. The internet may be your first thought, but when you read books by some of the most experienced hands in the business, you are sure to gain more. Some takeaways to consider before you pick up a good book are the following: 

  • The FX (foreign exchange) market is an international marketplace that permits you to exchange currencies of different countries.
  • Finance, commerce and trade have a worldwide reach. Due to this, forex markets are prone to be the most liquid and largest markets globally. 
  • When you trade currencies, trading takes place in pairs. For instance, USD/EUR is a pair of currencies for trading the US dollar against the euro. 
  • You should be aware that the markets pertaining to forex exist as cash/spot markets. They can also exist as derivatives markets, offering currency swaps, futures and options. 
  • Participants of forex markets use foreign exchange as a hedge to combat interest rate and global currency risk, for speculation on events that are geopolitical, and for portfolio diversification, and other reasons. 

 

1. The Black Book of Forex Trading - Paul Langer

As the cover of the book says, this book brings you a “A Proven Method to Become a Profitable Trader in Four Months and Reach Your Financial Freedom By Doing It”. After long years of testing the currency market waters, so to speak, Langer brings his own failures in currency markets to the fore (just so readers can learn by mistakes instead of making them in the first place). The author shows the reader how failure can lead to certain success, and the book is aimed to train beginners and intermediate traders to achieve success in currency trading. Included in the book are aspects to do with combating struggling markets, making profits consistently, ensuring you trade within boundaries, tactics for being successful in a matter of four months and other strategies to make you near-pro level at trading. 

2. Forex - 3 Manuscripts - Matthew Maybury

For trading in the stock market today, there are plenty of books to read. However, Maybury’s book, although far from dealing with stocks, is one of the most engaging reads regarding currency markets. The book highlights two main areas: one stresses on excellent tactics to gain profits and lessen risks, and the other focuses on a newbie’s guide to currency trading. The best part of the book is that it creates a novice’s blueprint trading plan and targets how to make the most with a few funds at first. 

3. The Simple Strategy - Markus Heitkoetter 

If you want a book that gives you techniques to conduct trades in forex, futures, ETFs and the share market today, Heitkoetter’s book is the one to read. Typically, you may open a demat account and venture into forex later on, and this book helps you across a gamut of assets and financial instruments. The book has gained popularity as it informs you of rules in trading, based on certain indicators, and gives you a clue about exit and entry points for your trades. If you wish to follow a day trading strategy, then this book has moves that can aid you. Furthermore, the book tells you that you don’t necessarily require any sophisticated software related to trading, but  simple charting software to plot Range Bars, Bollinger Bands, etc. 

4. The Art of Currency Trading - Brent Donnelly

A book that displays how to trade in currency with real market conditions is this one by Donnelly. Freshers will benefit from reading about particular strategies and techniques used successfully by the author for over two decades. You can learn about technical analysis, behavioural finance, macro fundamentals, fundamental analysis and the like in this book. 

5. The Forex Trading Money Management System - Don Guy

While starting your online forex trading journey, this book with a basic theory using a reversal of the movement in currency markets, can help get you on your way. The book suggests ways in which to manage currencies and thereby gain returns. The method of money management is commonly known as “Roulette Trader Money Management” which lets you perform a reversed way of trading to raise profits by decreasing the drawdown in many scenarios all at once. 

6. Currency Trading for Dummies - Brian Dolan

One among the best books for novices in currency trading, this book presents clarity and easy-to-follow instructions about trading in forex markets. In fact, the book is quite a good read even for seasoned traders who may require a rapid refresher course on the basic elements of forex trading. 

7. Day Trading and Swing Trading the Currency Market - Kathy Lien

Not only does Kathy Lien know a thing or two about trading in the stock market today in general, but the author is a globally recognised name in currency analysis. She is a regular guest on Reuters and Bloomberg’s CNBC shows. The book presents an approach which is two-pronged in nature. There is a theory part which is readable and not boring, and a part that permits you to take certain actions. The book is designed in a way that gives you an insight into currency trading. The step-wise recommendations make it a structured read providing factors that influence currency pairs and how to deal with these on a daily basis. 

8. How to Make a Living Trading Foreign Exchange - Courtney Smith

With a comprehensive introduction into the forex world, Smith’s book explains how the system of forex markets work. Most of the book devotes its content to ways in which you can earn profits, and even a steady income, from currency trading. The author provides helpful techniques to manage risk and gives you insights into the psychology of trading in forex. 

9. Japanese Candlestick Charting Techniques - Steve Nison

Credited with the introduction of a unique analysis tool used in currency trading, Nison’s ideas are widely used by the world’s online forex trading experts. Candlestick charting, originating in the East, is now used by the West extensively, and the method is also effective for futures trading. Apart from these areas, the versatile technique can be employed with equities, hedging, speculation and in any sphere of technical analysis. In case you are a currency trader and want to up your game, this is a great strategy to know about. 

10. Forex Trading: The Basics Explained in Simple Terms - Jim Brown

Arguably one of the best books for novices in currency trading, this book orients itself towards giving basic knowledge to beginners. Something to note is that the author is a self-taught forex trader, writing from experience. The language of the book is concise and clear and never takes a reader’s knowledge for granted. Key elements targeted by the book are the definition of forex and its markets, trading psychology, techniques to enter and exit trades, details of currency pairs, tips for selecting good brokers, and more. 

11. The Little Book of Currency Trading - Kathy Lien

This author has written a few great books on currency trading and it's worth mentioning them individually. A helpful guide that contains basic factors driving currency markets plus  ways to leverage good opportunities, this book gives you targeted goal-based plans. Fundamental principles include how to discover the best approach for investing, how to keep pitfalls and scams at bay and common mistakes that investors make. 

12. Technical Analysis of the Financial Markets - John J. Murphy

Books are sometimes referred to as “bibles” in certain subject areas, and these bibles contain all you need to know about particular topics of interest. Whether you trade in the share market today or the currency market, you need such a book to refer to at any given point in your trading experience and activity. Murphy’s book is such a book and although it was first out in 1998, it comes with a wealth of information that is relevant to all sorts of trading even today. Offering more than 400 charts for technical analysis, the book can help you perform certain actions that make your currency trades viable. Furthermore, a range of topics are touched upon, including relative strength, cyclic theory, inter-market linkage, plus more. . 

13. The Alchemy of Finance - George Soros

An established authority on trading and finance, Soros demonstrates a useful approach to trading in the forex markets. With the theory of “reflexivity”, a fundamental theory that is influenced by price, the author insists that this very approach afforded him the edge over others while investing. 

14. Bollinger on Bollinger Bands - John A. Bollinger

Bollinger bands are known to be effective indicators for any trading activity as most seasoned traders will know. In this book, concentrating on just these indicators, Bollinger tells the reader how to avoid traps and helps to make investors grasp the movement of markets. This is done by studying technical indicators with regard to movements of any markets, be it the share market today or the currency markets. 

15. FOREX - Dave Matias

The focus in this very efficiently written book is all about the crucial role that fundamental analysis plays in the movement in FX markets. The basis of all trading works on principles to do with fundamental analysis. Thus, in the currency markets, it stands to be the chief driver of foreign exchange flows. The book goes on to say that the FX market is inherently unstable and displays sensitivity to many kinds of macro or micro releases. Hence, it is important for investors to take advantage of fundamental analytics. The book gives emphasis to areas like myths in fundamental trading, bonds and currencies, macro and micro events and their influence on the markets, global flows, etc. 

16. 50 Pips a Day Forex Strategy - Laurentiu Damir

A beginner book that is for any aspiring trader who has never traded a day in their life, the idea of this book is to inform readers how to earn at least 50 pips in a day. You don’t merely learn how to trade in the forex markets with this wonder, but if you are dealing in the stock market today, the section on money management gives you handy pointers as well. Generally covering trading strategies for novices, this book encourages you to start trading with convenience and confidence. 

17. The Death of Money - James Rickards

The economy of the world has been dominated by a single currency for the longest time. This currency, as everyone knows, is the American dollar. The performance of the US dollar naturally has some impact on currencies of other nations, and their financial condition. Giving a deep glance into the financial potential of the world at large, Rickards highlights the incompetence of central banks, the greed of financiers, and the impending danger of reliance on the USD acting as a currency of reserve. Although this book may not give you any hands-on currency trading tips, it does give you a world of information about economic fallout and the implications that follow. 

18. Forex for Ambitious Beginners - Jelle Peters

Something that all new traders tend to do is to enter the markets without an iota of caution. Now that trading has become so easy with online forex trading available to anyone with a smartphone, traders and investors are enthusiastic to trade. The idea of this book is to prevent zealous trading and to warn traders to take steps with care. An extremely practical and explanatory approach to trading is dealt with, making certain that readers and potential investors get a grip of the various drawbacks while engaging in forex market trading. What’s more, those who read the book will learn key variables of success in forex trading like ways to safeguard capital, making a trading strategy match the personality of a trader, and create an individualistic trading pattern to maximise performance of the highest quality. You get a clue as to who the key players in the markets are, and which elements impact the currency markets the most. 

19. The Adventures of a Currency Trader - Rob Booker

Reading is not for everyone, and although you may be keenly interested in the forex markets and trading, you may not enjoy flipping through a book. Still, it makes sense to do some reading if you want to get ahead of your competitors and make some good gains. Furthermore, you may like to read online rather than open a physical book (although most books are readable online these days). The Adventures of a Currency Trader is a book that will keep you hooked once you begin reading. 

This book is rather like fiction than any instructional manual on forex trading. It tells the tale of a forex trader (created out of the figment of imagination of the author) known as Harry Banes. Even if you are more into the share market today than the forex markets, this makes for interesting reading as the trader experiences real-life situations that investors will relate to. The book goes a long way in showing fresh and seasoned traders and investors a few hard truths through entertaining situations. A must-have for any ardent investor. 

20. Currency Forecasting - Michael Rosenberg

Rosenberg takes on a different angle to educate investors about currencies in different nations. The author talks about how values of different currencies tend to fluctuate and the causes behind this. 

The Black Swan - Nicholas Taleb

Another book that directs readers in an interesting direction is The Black Swan. The author takes great effort to explain the impact of erratic circumstances and events and how they are rationalised after they occur. The main reasoning behind the author’s message is that most financial models are rife with flaws because they cannot have the means to account for sudden events. Hence, traders are faced with risk, and should be prepared. The book aims at giving traders some weapons to cope with unpredictability during trading. 

Reading Into Your Trades

Whether you are an avid reader or not, one thing should be clear to you as a trader. Knowledge is the key to getting your trades in the currency markets to make profits for you. The currency trading arena can be a bit challenging for investors to grasp and since you trade in currencies themselves, you may believe that there is more risk involved here than just if you open a demat account and trade in the share market. In the event that you have already invested in stocks through any vehicle, like any upcoming IPO, for instance, currencies can be a good way to diversify your portfolio if you get trading right. The simple way to do this is to educate yourself with any of the great books available to you, and use them for reference in your ongoing trading voyage. 

 

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